The interactive effect of information environment fluctuations based on audit quality and operational diversification

Information flow is a key parameter in an economic activity and acts as a key factor in the emergence, stability and efficiency of capital markets. According to the model of rational expectations, the cost of capital depends on the gap between the amount of public information and private information, as well as how information is disseminated. Increasing the information dissemination limits reduces the cost of capital by increasing stock price information. The purpose of this study is to investigate the interactive effect of information environment fluctuations based on audit quality and operational diversification.

For this purpose, data related to companies listed on the Tehran Stock Exchange for the period of 2009 to 2018 have been extracted and the combined data regression model has been used to test research hypotheses.

The results show that audit quality has a significant effect on pricing the quality of accounting information. On the other hand, the effect of operational diversification has been confirmed on the relationship between information asymmetry and the cost of capital. Finally, the research results show that audit quality leads to differences in capital expenditures at different levels of information asymmetry.